Stereotaxis, Inc.

Will you stand by? We're about to begin. Good morning. Thank you for joining us for Stereo Tax's fourth quarter and full year 2020 earnings conference call. Certain statements during the conference call and question and answer period to follow may relate to future events, expectations, and as such constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements involve known and unknown risks, uncertainties, and other factors which may cause the actual results, performance, or achievements of the company in the future to be materially different from the statements that the company's executives make today. These risks are described in detail in our public filings with the Securities and Exchange Commission, including our latest periodic report on Form 10-K or 10-Q. We assume no duty to update these statements. At this time, all participants have been placed on a listen-only mode. The floor will be open for questions and comments following the presentation. As a reminder, today's call is being recorded. It is now my pleasure to turn the floor over to your host, David Fischel, Chairman and CEO of Stereo Taxes.

Thank you, Operator, and good morning, everyone. I'm joined today by Kim Perry, our Chief Financial Officer. My prepared remarks today will be a bit longer than normal. I want to use the occasion of this being our annual call to provide a broader overview of Stereotaxis and our vision. I'll then review our accomplishments in 2020 and our focus and expectations for 2021. Stereotaxis is the global pioneer and leader of robotics for endovascular surgery. We have developed a highly innovative suite of robotic technologies that address the inherent limitations, risks, and challenges posed by manual catheters. Our mission is to make minimally invasive endovascular surgery broadly available to improve its safety and outcomes and to modernize it with the benefits of digitization and robotics. Endovascular surgery is a broad class of procedures where a catheter is inserted into a blood vessel and navigated through the vascular system to an area requiring therapy. While millions of catheter-based surgeries are performed annually to treat a wide variety of conditions, the mechanism of action of manual handheld catheters has fundamental flaws. During a procedure, therapy takes place at the catheter tip, but a manual catheter is held and manipulated several feet away at the handle. Using a manual catheter is like writing in small font while holding a pencil from its eraser or holding onto a gardening hose several feet back from its end. The mechanism leads to limited precision, limited stability, and limited reach. Manual catheters need to be rigid to allow for control to reach the tip, increasing the risk of patient injury. Procedures are complex and operator-dependent, and visualization of a catheter exposes patients' and physicians' x-ray radiation. Theriotaxis' robotic platform is designed to address these inherent limitations, risks, and challenges. It fundamentally transforms and improves catheter navigation by allowing for direct control of the catheter tip using precise computer-controlled magnetic fields. The magnetic fields can be viewed as invisible fingers holding onto the catheter tip. Direct control leads to , enables reaching areas previously unreachable, and enhances patient safety. Physicians operate with our robot from a computer cockpit, seated and fully protected from radiation, with full control over the procedure at their fingertips and with an ability to focus on the cognitive aspects of their profession rather than the mechanical efforts. Our technology is a platform technology, and the benefits of robotic precision and safety are applicable across a broad spectrum of endovascular and endoluminal procedures. We've begun efforts to address several new clinical applications, But to date, our primary focus has been on one specific endovascular procedure, cardiac ablation for the treatment of heart arrhythmias. Cardiac ablation has become a widely accepted therapy with over 1 million procedures performed annually and over $5 billion in annual medical device sales. The benefits of robotic magnetic navigation, precision, stability, reach, and safety are pronounced in cardiac ablation procedures and have been extensively validated. Hundreds of physicians at over 100 leading hospitals have treated over 100,000 patients with our technology, and there are over 400 scientific publications documenting our clinical value. A highly differentiated technology that confers meaningful clinical value to patients and physicians in a large field of medicine serves as the perfect foundation on which to build a preeminent medical robotics company. I have full confidence that Stereotaxis' magnetic mechanism of action, is the best way to treat patients and to address the inherent limitations and risks of manual endovascular surgery. Our vision is to positively transform endovascular surgery with robotics in a similar fashion to how intuitive surgical transforms laparoscopic surgery. To realize that vision, we have spent the last four years rehabilitating stereotaxis from its previous missteps, planting the seeds and nurturing the green shoots that will lead to a significant long-term growth. Our rebuilding efforts can be viewed within three broad categories, establishing financial strength, implementing the right commercial capabilities, and advancing a strategic innovation plan. 2020 was a year of significant progress on each of these fronts. Financially, Stereotaxis starts this year in the strongest financial position of its history, with $44 million in cash and no debt. Despite significant macro challenges last year and their negative impact, we have been able to operate at essentially break-even, with cash use of $1.2 million. This financial prudence is not at the expense of progress, and we continue to invest meaningfully in the drivers of long-term growth in our team and in our infrastructure. Commercially, Stereo Texas' primary focus has been on developing the infrastructure and processes that ensure existing robotic practices are successful, can grow, and can showcase their critical leadership in their communities. His focus on the success of existing robotic practices may not be the quickest way to add new customers, but it is the best strategy for increasing adoption of robotics and enhancing long-term business value. We view this as a multifaceted effort and have given various examples on previous calls of some of the key components. A few highlights of 2020 include the broad deployment of telerobotic support, allowing our clinical team to support procedures remotely. We are supporting multiple procedures daily around the globe with this differentiated capability and view our leadership as a strategic strength that will become increasingly valuable as remote support and collaboration in the operating room gains broader acceptance. The Robotic Electrophysiology Fellows Program continues to grow and plays a central role in ensuring the future leaders of our field are confident in our technology and its clinical value. 17 fellows successfully graduated from our program in 2020, and 21 new fellows enrolled in the program. The quantity and quality of clinical literature on our technology also continues to grow, with 31 peer-reviewed publications in 2020. Several publications last year were particularly interesting. including a case study on the treatment of a COVID-19 patient in ventricular storm, a review of over 1,000 patients treated at a single institution with outstanding efficacy and safety results, and the first use of our technology to treat pulmonary hypertension patients in a prospective randomized trial. We're already aware of additional impactful publications in queue for this coming year and look forward to sharing when available. We will continue to focus our commercial efforts on ensuring existing robotic practices are successful, but with the FDA approval of Genesis, we began incrementally investing, experimenting, and establishing capabilities that will allow for a robust capital sales pipeline. We are building this capability in a methodical fashion along with the buildup of our supply chain and in a way that is prudent, sustainable, and can support significant growth in capital sales over many years. In 2020, we were proud to sell and successfully install the first two Genesis systems at Helsinki University in Finland and Banner University in Arizona. Our Genesis system is performing to the highest expectations of our customers. Both sites are highly active, and the Genesis system was showcased in live broadcast procedures from both sites in December. On our last call, we provided preliminary guidance for 2021 of $10 to $20 million in robotic system sales. We are pleased with our momentum to date in meeting that guidance. We have five capital orders outstanding for robotic systems, four of which were generated in the period since our last call. The makeup of those orders are particularly interesting and reflect the initial green shoots of a broad-based global resurgence in interest in our robotic technology. Two of the orders are for genesis systems from US hospitals, one in the southeast and one in the west. Both hospitals are establishing entirely new robotic electrophysiology programs, and adoption of our technology is being championed by physicians that have no prior experience with robotics. Two of the orders are for Genesis systems in Europe. One, a replacement system for an aging Niobe, and the second is, again, a Greenfield system, which will represent the first robotic electrophysiology system in its country. Each of these systems have been ordered along with Stereotaxis' Model S imaging system. The fifth order is a Niobe system sold to a Greenfield customer in China, a country where we are seeing increasing interest in our technology despite Genesis lacking regulatory clearance. We expect all of these systems to be installed and recognized as revenue this year. We are excited by our initial momentum, but want to temper that enthusiasm with a reminder that the macro environment remains challenging for capital equipment and there's pronounced pressure from hospitals to delay lab replacement projects. We continue to see significant interest in Genesis, but the timing of any individual order remains difficult to predict. Genesis Stimulating a return to robust system sales reflects the first wave of revenue growth outlined in our strategic innovation plan. We have previously described two subsequent waves of revenue growth driven by strategic innovations. The first of these being a significant increase in disposable revenue with the launch of a proprietary ablation catheter, and the next being a set of innovations that will expand our technology into additional clinical applications. We are pleased with the significant progress we have had on both of these subsequent waves and how the three waves of revenue growth are poised to follow each other in relatively quick succession. SerioTexas' advanced robotically navigated magnetic ablation catheter has been advancing methodically through the establishment of a robust manufacturing process and bench and preclinical testing of that process. We are preparing production of hundreds of catheters to enable formal validation studies at the start of the second quarter and regulatory submissions for CE-MARC and an FDA IDE trial in summer. Concurrent with those efforts, we are progressing clinical, regulatory, and an EU commercialization plan. We have had initial discussions with regulators in both Europe and the U.S. and continue to expect EU commercialization and initiation of a pivotal U.S. trial in 2021. Given the feedback we received from physicians that have navigated our catheter in animal studies or in phantoms, we are excited and confident that the catheter will prove to be a significant improvement in clinical care and the physician experience. We are proud of our robust investment in innovation and the impact that innovation will have on patients, on our customers, and on stereotaxis. We are also cognizant that all of our technologies can be improved further. And our third wave of innovation is designed to be the most impactful to our revenue growth, both within electrophysiology and in expanding our robotic technology into several multi-billion dollar adjacent markets. We've been spending significant effort on this third wave and expect to be in a position to showcase key aspects of this third wave at the end of this year. Kim will now provide some commentary on our financial results, and then I'll make a few final comments before opening the line to Q&A.

Thanks, David, and good morning, everyone. Revenue for the fourth quarter of 2020 totaled 6.8 million, consistent with the prior year fourth quarter. Recurring revenue for the quarter was 5.9 million, and system revenue was 0.7 million. Revenue for the full year 2020 totaled 26.6 million. Recurring revenue of 22 million for the full year 2020 declined 15% from the prior year, primarily due to the impact of the COVID-19 pandemic on procedure volumes. We continue to see a gradual recovery in procedure levels from the lows reached in the second quarter of 2020, but volume remains below pre-pandemic levels. System revenue of $3.6 million for the full year 2020 increased from $2.1 million in the prior year, reflecting the successful installation of our initial Genesis RMN system. Gross margin for the fourth quarter and full year 2020 were approximately 77% and 71% of revenue. Operating expenses in the fourth quarter were $6.4 million, consistent with the $6.3 million in the prior year quarter. Operating expenses for the full year 2020 told $25.7 million, down from $27.6 million in 2019. Operating loss and net loss in the fourth quarter were both $1.2 million. For the full year, operating loss was $6.7 million with a net loss of $6.6 million. Negative pre-cash flow for the full year 2020 was $3.3 million and including funding from the payroll protection program was $1.2 million compared to $4.6 million for the full year 2019. At December 31st, we had cash and cash equivalents of $44.2 million. I will now hand the call back to David.